Asked by Monica Landrum on May 08, 2024
Verified
The McQuires pay a monthly mortgage payment of $938.They also pay a semi-annual property tax bill of $3,298 and semi-annual homeowner's insurance of $840.The property tax and insurance are paid monthly into an escrow account to their lender.What is their monthly payment to their lender?
A) $1,283.16
B) $1,518.6
C) $1,627.67
D) $1,672.66
Escrow Account
An escrow account is a financial arrangement where funds or assets are held by a third party on behalf of two other parties in the process of completing a transaction.
Semi-annual
Refers to events or processes that occur or are carried out twice a year.
Mortgage Payment
A regular payment made towards a mortgage loan, typically including both principal and interest components.
- Become proficient in the basic mathematics of finance that includes working with percentages and calculating proportions.
- Understand the importance and function of insurance and tax payments in homeownership.
Verified Answer
$3,298 + $840 = $4,138 (semi-annual payments)
$4,138 / 12 = $344.83 (monthly payment)
Now, we add the monthly mortgage payment to the escrow payment for property tax and insurance:
$938 + $344.83 = $1,282.83
Therefore, the McQuires' monthly payment to their lender is $1,282.83, which rounds up to option C, $1,627.67.
Learning Objectives
- Become proficient in the basic mathematics of finance that includes working with percentages and calculating proportions.
- Understand the importance and function of insurance and tax payments in homeownership.
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